Problem: I have this silly 'girly' PSX game that my friends and I used to play when the boys would step away from the console, Puzzle Fighter Turbo.. I have the game still so I have ripped the .bin file and named it with the proper code for WiiSX (as specified here)

So I want to run this game from my USB HD; wiiSX will see the game there, but will not play (boots to black screen).. I have tried other games also but just read that the .dol and games must be on the same drive.. Also I do have the directory setup correctly and the PS1 bin file with the games..

So is it possible for me to move that app to my usb drive? Will HBC recognize app folders in multiple locations? Is there an easy solution to this besides using a larger SD card and storing my PSX games there?

Yes it will recognize the apps folder on your HD. It might not if you have your SD card in tho. Simple solution is to move all of it over to your HD if you have a fat32 partition. Then there is no need for the SD.